Obama Campaign Donor Wins FCC Waiver From Auction Rules

The FCC, led by Democratic Chairman Tom Wheeler, seen here, voted 3-to-2 along party lines behind closed doors July 21 to waive the rule, allowing the company to seek bidding credits that offer discounts on winning bids, according to people with knowledge of the vote who asked for anonymity because the proceedings hadn’t been made public. Photographer: Andrew Harrer/Bloomberg

July 23 (Bloomberg) -- A private-equity company owned by a
campaign donor to U.S. President Barack Obama won a waiver from
the Federal Communications Commission that may help it bid in
airwaves auctions.

Grain Management LLC may not have qualified for benefits
reserved for small businesses because airwaves leases to AT&T
Inc. and Verizon Communications Inc. caused it to exceed the
program’s income limits, the company had said in an FCC filing.
The agency has adopted a waiver, an FCC spokesman, Neil Grace,
said yesterday in an e-mail without providing details.

Grain Management, based in Sarasota, Florida, invests in
media and communications and is controlled by David Grain,
according to the company’s March 4 filing asking the FCC to
waive the rule.

“Certainly there has not been a waiver like this,” Andrew
Jay Schwartzman, a Georgetown University law professor, said in
an interview. “The circumstances have not arisen” with the
revenue of the largest wireless providers entering the picture.

David Grain contributed more than $60,000 to Obama’s
presidential campaign and the Democratic National Committee in
2008, and $22,500 in 2012, Federal Election Commission filings
show. He was also one of Obama’s top fundraisers for the 2008
election, bringing in $200,000 to $500,000, according to the
campaign.

The FCC, led by Democratic Chairman Tom Wheeler, voted 3-to-2 along party lines behind closed doors July 21 to waive the
rule, allowing the company to seek bidding credits that offer
discounts on winning bids, according to people with knowledge of
the vote who asked for anonymity because the proceedings hadn’t
been made public.

1,614 Licenses

“We are very excited about the waiver” because it appears
to relax rules for companies other than Grain, too, and may help
small and minority businesses participate in the forthcoming
wireless auctions, Nicol Turner-Lee, vice president at the
Minority Media & Telecom Council, said in an interview.

The Washington-based nonprofit that seeks to preserve and
expand minority ownership in telecommunications in April told
the FCC it supported Grain’s request.

The airwaves auctions, which were authorized by Congress,
are intended to raise at least $28 billion for U.S. national
priorities including debt relief. A sale earlier this year of 10
megahertz raised $1.56 billion.

A sale in November will offer 1,614 airwaves licenses for
65 MHz of airwaves. It’s part of a series of U.S. auctions
designed to provide more frequencies for use by smartphones. It
will be the largest since a 2008 auction that drew bids totaling
more than $19 billion, Wheeler said March 31 as the commission
set rules for the sale.

Auction Participation

Without the waiver, the leases to AT&T and Verizon would
have forced the FCC to include the wireless titans’ revenue when
deciding whether Grain Management met criteria for bidding help
in auctions. That may deny Grain Management help designed for
small companies, the company said in its filing.

“We should have the right to prove we qualify,” Michael
McKenzie, a partner and chief strategy officer at Grain
Management, said in an interview. “Let’s make sure we’re not
excluding people who actually belong in the category.”

“Treating entrepreneurs and small businesses like
multibillion-dollar corporations when competing for spectrum
licenses could deter them from participating in auctions,”
Grace said.

Among numerous U.S. lawmakers to receive donations from
David Grain was Representative James Clyburn, a South Carolina
Democrat who received $8,400 from 2009 to 2012, according to the
FEC. He is the father of Mignon Clyburn, a Democratic FCC
commissioner who voted to approve the waiver.

Asked about David Grain’s contributions, McKenzie replied,
“There shouldn’t be an attempt to create a political issue
where there is none.”

“Any decision is clearly on the merits, and that’s it,”
McKenzie said.